Paying off your debts may seem like an unachievable goal, especially as prices rise and inflation becomes more widespread. We’re here to help with five simple strategies for paying off debt, none of which involve getting a second job. (Because let’s be honest, ain’t nobody got time for that.)

1. The snowball vs the avalanche

Yes, this is really two strategies, but they pair well together because they show there’s no one right or wrong approach to debt repayment.

With the snowball strategy, you pay off your smallest debt first. While still paying the minimum amounts due on your other debts, you put all the extra funds you can toward that smallest debt. Once that’s paid off, you move on to the next biggest debt, and so on. Theoretically, you’ll build momentum as you go because you can keep rolling the amount you pay each month into the next largest debt.

With the avalanche strategy, you start on the debt that has the highest interest rate, while still paying minimums on your other debts. Once that’s paid off, you move on to the debt with the next highest interest rate. While this may make more financial sense than the snowball effect because it wipes out your most expensive loans first, it can be harder to build momentum, as it may take a while to pay off that first debt.

If you’re finding those minimum payments hard enough, you may want to try the snowball effect, but it’s worth considering both strategies to see which one is a better fit for you and your finances.

2. Debt consolidation

Debt consolidation is the process of rolling all your debts together into one monthly payment. Often, this gets you a lower interest rate, and makes your payments easier to manage—which is why we recommend consolidating and refinancing in our Debt Reduction Plan. Consolidation is most commonly done with credit card debt, which tends to have higher interest rates, but can also be done with personal loans and medical bills.

Debt consolidation may seem like a great option, and it can be, but again, you don’t want to jump in without considering all your options. While consolidating can lower your monthly payment, it might take longer to pay off, leading to a higher expense overall.

You’ll also need a good credit score (in most cases) to qualify for debt consolidation, since you’re effectively having the lender pay off your debts, then agreeing to repay that lender over time.

For more information about debt consolidation, and some real-life examples of what it might look like, see our Debt Management Plan.

3. Budgeting and cutting expenses

It may seem obvious, but budgeting is still one of the best ways to consistently pay down debt, especially if you’re struggling to set aside enough for debt repayment each month. Today, there are plenty of tools out there that make budgeting easier, from Excel to apps like Mint and Goodbudget.

Start by tracking how much money you make and spend each month. Then, once you have some consistent data, categorize your spending into essentials and nonessentials. The recommended rule is 50/30/20 (essentials/nonessentials/savings) but do what works for you.

With a firm budget in place, you can start thinking about ways to limit your spending or lower your bills. There may be nonessential expenses you can cut temporarily until your debts are paid, or you may want to try and lower some of your most expensive bills. Calling your service providers to negotiate a better rate on your internet, energy, or mobile phone bill is worth a try, and if that fails, you can always look for providers that offer more affordable prices.

Learn more about how budgeting can help you pay off your debts faster, and how we can help you with the budgeting process.

4. Pay more than the minimum when you can

There may be some months when you can barely eke out that minimum payment amount, but if you find yourself in a good place financially—say you got a bonus or a great tax refund—channelling that extra money into paying off your debt can go a long way toward putting you in the clear.

Just be careful not to pay more than you can comfortably afford. While paying off debt should be one of your top priorities, you don’t want to force yourself into further debt by neglecting your emergency fund or other savings.

5. Debt relief

Debt relief shouldn’t necessarily be your go-to strategy, but if you’ve tried everything else and are still struggling, it may be worth considering, especially if you won’t be able to pay off unsecured debt (credit cards, personal loans, and medical bills) within five years and/or if your total amount of unsecured debt is equal to at least 50% of your gross income.

In that case, you may want to try:

● Debt management, in which you work with a counselling agency to reduce your interest rates or waive extra fees
● Bankruptcy, in which you can file to either have your unsecured debt erased or get on a court-approved repayment plan
● Debt settlement, in which you settle your debt directly with your creditors, either yourself or through a third-party

Like most things, you can manage that mountain of debt by taking it one step at a time, doing what you can when you can, and sticking with it. It’s easy to get overwhelmed, but if you consider your options carefully and consistently follow one or more of these strategies, it should be 100% possible to pay off all your debt with time.

If you need help strategizing to pay off your debts, we’re happy to help you create a Debt Reduction Plan that caters to your unique financial situation.